The Expert Podcast

So how is it determined whether or not a vehicle has a salvage title or a clean title? Well, the states have various calculations for how that's done. Many times, it's if the damage is more than a certain percentage—75% or 80%. Sometimes there's other criteria, but here's a good example. This happens to be from the state of Connecticut and describes the Connecticut total loss threshold and how that's calculated. It's important to understand how this is done because even if you purchase a vehicle that has a clean title, if the vehicle has damage, it could turn into a salvage title later for you. So, you have to understand how this is done, what the calculation is, and there's a lot of misconceptions about what makes a vehicle a salvage title.

Well, in Connecticut, the way that it's done is this: their 38A 353 statute calculates the settlement amount for motor vehicles whenever a damaged motor vehicle has been declared a constructive total loss. The insurance helps pay for this. What is a constructive loss? What is the definition? Well, as it says right here, a constructive total loss means the cost of repair or the cost of both salvage equals or exceeds the total value of the property at the time of loss. Now, this may sound a little confusing, but here's how it works. Let's say you have a vehicle that is worth $7,000. And I'll just use some numbers, but you can plug your own numbers in. Let's make it higher because it's tough to find a $7,000 vehicle anymore. Let's say a $10,000 vehicle is involved in some kind of accident. Minor sheet metal damage, a couple airbags go off, maybe some glass is broken, and the repairs are going to cost, let's say, $6,000.

You might say, "Well, that's a lot of money." Look, this day and age, almost any fender bender is going to cost five or six $6,000 by the time you change out the bumpers. You do any frame straightening because everything's unibody. You do paint, a lot of labor and paint, and especially when airbags go off, airbags can be $8 or $900 per airbag to replace or to repack. So, you have a minor fender bender, a couple bags pop, you're talking five or six grand. You might say, "Well, that's only, you know, 60% of the value." However, what they do is, from the 10,000, they calculate the salvage value. What is it worth right now? So, if you look at that $10,000 vehicle that's crashed, what is it worth in its current condition? Well, it may be worth more than you think because, at auction, there is probably going to be a salvage parts dismantler that is willing to pay $5 or $6,000. And the reason why is because it still has a good engine transmission, probably some body panels, computers, and other airbags. There's many parts that can be dismantled. But by the time they take those parts off, they could probably sell $1,000 worth of parts, but they have costs for dismantling labor costs, shipping costs, retail costs—that kind of thing. So, they're going to pay probably four or $5,000 for it. So, if they pay $5,000 and the repairs are another $5,000 or $6,000, that's a total loss. It's what's called a constructive total loss. The car isn't completely destroyed, but constructively and financially, it's a loss. And we've seen this happen with cars that didn't even go through insurance. If you have a car that was damaged in an accident and you fix it, if there's anything about that vehicle that brings it to the attention of the DMV, they're going to flag it as salvage. And if the insurance company didn't make it a salvage, the DMV might.

How would that happen? Well, if you look to sell it in its current condition as part of that sale, Most states have a requirement that the vehicle be inspected, even if it's just a VIN inspection, a safety inspection, or an emissions inspection. Maybe you sell it to another state. Many states have a rule that says if you bring a car in from another state, we have to inspect it. Maybe it's when you get insurance that they want to inspect it to make sure that it's in good condition. Maybe you bring it in for service, and the service department says we're not sure if this car is safe for the road because we see there was some frame damage, which triggers an inspection.

If that's done, here's what happens here. We're going to stick with Connecticut under that Connecticut total loss threshold salvage inspection information and this the same statute 38a 353 388 353 same one St of Connecticut Department of Motor Vehicles um salvage inspection locations there's two hamton and weatherfield those are the two main offices Weathersfield is their main branch the capital of Connecticut is Hartford but weatherfield is close by and that's where they do a lot of them they have one downstate in hamon for people who don't live near Hartford they charge an inspection fee of $88 okay so far so good not the end of the world the owner must purchase and complete an inspection report and there's a form for that b269 invalidated before presenting the vehicle for inspection be sure to allow enough time and have the inspection scheduled you knowe here this is a separate issue but you notice they say right on it mv907a is not acceptable by the Connecticut DMV any of you out there that have an mv907a from New York and are trying to bring it to another state forget it um the other states don't accept it because they require you to bring it back to New York to get it inspected there a private individual cannot drive or tow the salvage vehicle to the DMV office can only bring it in on a flatbed trailer or car carrier no wheel of the the vehicle May touch the ground means you can't use a toe DOL with two on two on the DOL two rolling can't do that um can be driven by uh Bonafide repairer with repair plates only when the dealer is the owner of the vehicle however if it fails they got to tow it away so if you're a dealer and you put on dealer plates and you drive it there cross your fingers because if it fails you got to call a trailer the owner of vehicle has been declared Salvage cannot transfer ownership on an application for title you must first obtain a duplicate title which says Salvage and then sign it over to the purchaser if it's branded Parts only or unrebuilt or re-registered under any circumstances this is something you know we've talked about for years non-reparable non- rebuildable Parts only those cars are done what do required documents for salvage inspection you have to have that K1 186 it's a salvage vehicle repair report showing what the major component parts are replaced according to Industry standards you have to present that so they have to see that the parts you put on are legitimate parts put on properly invoices receipts uh apply meaning that you have to have proof that these parts you put on are not stolen you have to have photographs clear photographs of the repaired area and they must show the entire vehicle by at least four photos on each corner the damage areas prior to repairs so if you already fixed it and you didn't show what it was like before you might be out of luck the repaired areas within new parts um prior to seam ceiling painting or rust proofing they want to see how it's attached how they come together before you cover it up with a bunch of junk they want to see what what happens how the new parts were attached if they're welded the area prior to painting and corrosion proofing if it's no longer visible photographs must be attached this is a hard thing to do you have to have an airbag certification statement if the vehicle is equipped with an airbag a separate statement will be required in all cases completed by a dealer with proof of certification for all vehicles regardless if the airbag was deployed or not so if you have a vehicle that had major damage and the airbags didn't pop that's good you don't have to spend the money for the airbags you still have to get a dealer a franchise dealer look franchise dealer what does franchise dealer means it means the manufacturer who built that car a dealership from that manufacturer has to look at it not Joe's Garage not Bob's Honda Repair it's executive Chevrolet like the new car dealer how much is that going to cost you for to bring it in and have them inspect it insurance adjusters report if it was an insurance claim receipts for major component parts receipts are required for any major component parts that are replaced engine transmission Fender Hood door tailgate trunk plant you you know you see what we're talking about here right the receipts for the these parts must clearly indicate the name of the source and the VIN if it was a used part again this can kick in even if the insurance company did not report it as a salvage if the calculation makes it a um constructive Salvage based on the total loss threshold remember constructive Salvage what does that mean constructive total loss means the cost of repair exceeds the total value of the property so about the only way you can get away with this is if you buy a crash car nobody knows about it you fix it up before anybody looks at it and you can get it through the inspection without people realizing wait a minute this car was a major repair because if you bring it for even a casual Vin inspection or emissions inspection and somebody sees that there was Major repairs done to it it can get flagged and even some dealerships will flag it because they don't want to have the liability of that car being on the road if they put their hands on it they touched it they want to get it off the warranty too sometimes lenders will want to have a vehicle inspected to make sure they're lending money on a vehicle so anytime you're buying a car from Copart or IAA or one of these auctions make sure that you know even if it's supposedly a clean title and there's no Salvage brand on it or rebuilt brand that any damage could trigger a salvage inspection even if you think you're getting away with a clean title so these things can be triggered by the total loss threshold that might not be as much as you think you might say well it's under 75% damage well you have to add back in the salvage value what the vehicle is worth now and if it crosses 75% with that you're done that's a salvage and sometimes the vehicles um that seem like they have a clean title it's just because the insurance claim hasn't been through the system yet once that insurance claim gets into the system then all bets are off the towing company can report it coart can report it lots of people can report it even after the fact and you might find out later that you have to jump through a bunch of hoops to get your salvage vehicle approved.